Question

Pam and Jim have been happily married for 30 years and have been successful as partners in a family scrapbooking company. Now they are ready to retire, and their residual income will put them in the 35% marginal tax bracket. Thankfully they made a wise investing decision in the lean, early years when their tax rate was only 10%. Now they will save greatly on their tax liability. What type of investment account will allow them to make tax-free withdrawals?

Answer 1

Answer: Roth IRA

Step-by-step explanation:

A Roth IRA is a special retirement account where you pay taxes on money going into your account and then all future withdrawals are tax-free. Roth IRAs are best when you think your taxes will be higher in retirement than they are right now. You can't contribute to a Roth IRA if you make too much money.